March 5, 2018 / 5:44 AM / 14 days ago

China's Tasly to list biotech arm in $1 billion Hong Kong IPO: sources

HONG KONG (Reuters) - China’s Tasly Pharmaceutical Group is planning to list its biopharma unit in Hong Kong to raise about $1 billion, in what is likely to be the largest biotech float in the city this year, people with knowledge of the matter said.

Shanghai Tasly Pharmaceutical Co Ltd is pictured in Shanghai, China March 2, 2018. REUTERS/Aly Song

The plan comes as Hong Kong Exchanges and Clearing, the city’s exchange operator, is proposing changes to its listing rules to woo early-stage drug developers.

Tianjin-based Tasly, well known for producing traditional Chinese medicines, aims to list its wholly owned biopharma arm - Shanghai Tasly Pharmaceutical in the second half of 2018, said the people. Shanghai Tasly is working with advisors on the proposed share sale, they added.

Details on the valuation of Shanghai Tasly and what percentage of the company is expected to be floated weren’t available, said the people, who declined to be identified as they were not authorized to speak with the media.

The company is yet to decide whether to sell existing shares, or issue new shares, or do a combination of both, the people said.

Tasly and Shanghai Tasly didn’t immediately respond to Reuters request for comment.

Shanghai Tasly’s planned listing is expected to be the first in a series of biotech firms keen to test the Hong Kong market. Other hopefuls include Chinese biotech company Ascletis, Shanghai Henlius Biotech, a subsidiary of Shanghai Fosun Pharmaceutical, and U.S.-based cancer detection start-up Grail, according to IFR, a Thomson Reuters publication.

Founded in 2001, Shanghai Tasly launched in China one drug aimed at treating blood-clot induced heart attacks, known as pro-UK, in 2012. It is also in the process of developing more than 10 other drugs, according to its website and one of the people.

In a consultation paper published late last month, HKEx said it will allow biotech companies at the pre-revenue stage to list in the city, subject to certain criteria, including that the firms must have developed at least one core product beyond the concept stage.

The stock exchange is expected to start accepting listing applications from such companies after the consultation process is concluded in April at the earliest. Currently, China’s securities laws do not allow firms that have yet to turn profitable to go public on the mainland.

The plans are part of HKEX’s broader move to attract blockbuster Chinese tech companies including Alibaba Group Holding that is already listed in New York, as well as the country’s “new economy” companies, which range from biopharma firms to online retailers.

Chinese immunotherapy company BeiGene, Shanghai-based Zai Lab and Hutchison China MediTech, are all listed on Nasdaq, currently the preferred listing venue for mostly as-yet unprofitable biotech drug developers.

Hong Kong is hoping that easing rules for biotech listings and offering concessions to U.S. and UK-listed companies considering a secondary listing in Hong Kong will help it compete with New York and revitalize its IPO market, which has been dominated by Chinese state firms, other financial and property groups.

Shanghai Tasly is also considering a pre-IPO fundraising, said two of the people, although the size of the financing hasn’t been finalised.

Reporting by Julie Zhu and Fiona Lau of IFR; Editing by Shri Navaratnam

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